Some SPACs that are coming up on their deadline are asking their investors to extend their mandates for another 12 months. I was wondering from those close to the PE or SPAC space whether you think there is evidence of improving appetite in the space.
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SPAC market has sucked for the last 18+ months
SPACs can always go public it is a free option for a fund looking to put capital to work. If you are a company and have absolutely no other option you can consider getting listed without raising any capital and hoping you can sell 10% of your stake at 1/20 of the declared valuation. If you are a banker, you would look stupid bringing this up to your client
A free option to put capital to work? Quite simply not the case.
The SPAC market has a very long road to recovery. The problem is poor performance of SPACs is a self-reinforcing cycle. Bad actors in the industry do bad deals, bad deals trade badly, SPACs become providers of capital of last resort, no good seller wants to sell to a SPAC, there are no good targets available to SPACs, sponsors can only do bad deals which will trade badly (or otherwise take a zero on sponsor risk capital), etc.
Some of this is an over-simplification in that SPAC market problems aren’t entirely due to bad deals. The SPAC market decline coincided with a massive selloff in growth generally, and if you look at IPO performance over the same period it was similarly bad. So for these reasons the SPAC market can come back sometime in the future – there are good use cases for the vehicle that can begin to repair their reputation. It will just take some time for people to become less adverse to the vehicle.
I have worked for a serial SPAC sponsor so I am familiar with just how bad the SPACable options are right now. At some point our team just decided this vehicle doesn’t make sense anymore. Maybe again someday, but right now any seller who can take PE money instead is going to.
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